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1. Dictionary

   depletion allowance

   noun

   • 1. a tax concession allowable to a company whose normal business activities (in particular oil extraction) reduce the value of its own assets. North American

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2. • Tax deduction

     • A depletion allowance is a tax deduction allowed in order to compensate for the depletion or 'using up' of natural resource deposits such as oil, natural gas, iron, timber etc. The allowance is a form of cost recovery for capital investment which, unlike income, is not taxable.
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     Depletion Allowance Definition & Example - InvestingAnswers

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   What is a depletion allowance?

   • A depletion allowance is a tax deduction allowed to compensate for the depletion or 'using up' of natural resource deposits such as oil, natural gas, iron, timber, etc. It is a form of cost recovery for capital investment which, unlike income, is not taxable.

   Depletion Allowance Definition & Example | InvestingAnswers

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   What is the oil depletion allowance?

   • It is designed to encourage investors to engage in investments such as oil and gas production by applying the cost depletion deduction. In the United States, individuals who hold an economic interest in a mineral deposit, such as natural gas reserves, can claim the oil depletion allowance.

   Depletion Allowance Explained | DW Energy Group

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   What is depletion accounting?

   • Depletion is an accounting technique that allows investors to write down the value of a natural resource as it's extracted or harvested. Enshrined into the tax code in 1926, depletion is most commonly used in the oil and gas, mining, and timber industries.

   What Are Depletions? | The Motley Fool

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   What is percentage depletion?

   • Percentage depletion is a capital cost recovery method that is allowed for nearly all natural resources except timber. The IRS sets different depletion rates for different resources. Some of the rates are as follows: The percentage depletion formula requires that gross income be multiplied by the appropriate percentage.

   Percentage Depletion: Meaning, Overview, Benefits - Investopedia

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   What does depletion mean?

   • The IRS defines depletion as the “using up of natural resources extracted from a mineral property by mining, drilling, quarrying stone, or cutting timber.”

   How to calculate depletion expense - Tax & Accounting Blog Posts by

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   What is a depletion deduction?

   • In accounting, the depletion deduction enables an owner or operator to account for the reduction of the mineral property’s value or basis as a result of the extraction of those natural resources. To further explain, here’s an example: A mining company buys mineral rights for $20,000,000 and spends an additional $4,000,000 to develop the land.

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4. investinganswers.com › dictionary › dDepletion Allowance Definition & Example - InvestingAnswers

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   Aug 12, 2020 · A depletion allowance is a tax deduction allowed in order to compensate for the depletion or 'using up' of natural resource deposits such as oil, natural gas, iron, timber etc. The allowance is a form of cost recovery for capital investment which, unlike income, is not taxable.

5. www.britannica.com › money › depletion-allowanceDepletion allowance | Oil & Gas, Capital Investment, Tax ...

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   depletion allowance, in corporate income tax, the deductions from gross income allowed investors in exhaustible mineral deposits (including oil or gas) for the depletion of the deposits. The theory behind the allowance is that an incentive is necessary to stimulate investment in this high-risk industry. The depletion allowance is similar to the ...

6. www.investopedia.com › p › percentage-depletionPercentage Depletion: Meaning, Overview, Benefits - Investopedia

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   Jan 17, 2021 · Percentage depletion is a tax deduction for depreciation allowable for businesses involved in extracting fossil fuels, minerals, and other nonrenewable resources from the earth. Key Takeaways

   • Author: Julia Kagan

7. Videos

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8. tax.thomsonreuters.com › blog › how-to-calculateHow to calculate depletion expense - Tax & Accounting Blog ...

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   Oct 31, 2023 · There are two methods to calculate depletion expense: Cost depletion and percentage depletion. When it pertains to standing timber, cost depletion is the required method. However, for oil and gas wells, mines, other natural deposits (including geothermal deposits), and mineral property, companies generally use the method that gives them the ...

9. majrresources.com › how-is-the-depletion-allowanceHow is the depletion allowance calculated for tax purposes?

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   Definition of Depletion Allowance. The depletion allowance is a tax deduction available to those in the natural resource extraction business, such as mining, drilling, or timber companies. This allowance permits these businesses to account for the reduction in a product’s reserves.

10. www.fool.com › terms › dWhat Are Depletions in Finance? | The Motley Fool

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    Sep 23, 2024 · Depletion is an accounting technique that allows investors to write down the value of a natural resource as it's extracted or harvested. Enshrined into the...

11. www.dwenergygroup.com › depletion-allowance-explainedDepletion Allowance Explained - DW Energy Group

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    May 18, 2023 · Depletion Allowance Explained. The IRS code provides the percentage or cost depletion allowance as a means for owners to account for the depletion of reserves during the production and sale of oil and gas. This depletion allowance is a deduction from gross income and reflects the reduction of mineral deposits.